Benchmark’s Uber Suit Signals End of Era for Imperious Founders

Benchmark’s Uber Suit Signals End of Era for Imperious Founders

click photo for more information
Benchmark’s Uber Suit Signals End of Era for Imperious Founders
When Uber Technologies Inc. backer Benchmark Capital filed a lawsuit against the startup’s founder Travis Kalanick for using allegedly fraudulent means to pack the board with his loyalists, it sent a strong signal that Silicon Valley’s so-called founder-friendly era is coming to an end. Going back years, venture firms have given Kalanick and his peers […]

When Uber Technologies Inc. backer Benchmark Capital filed a lawsuit against the startup’s founder Travis Kalanick for using allegedly fraudulent means to pack the board with his loyalists, it sent a strong signal that Silicon Valley’s so-called founder-friendly era is coming to an end.

Going back years, venture firms have given Kalanick and his peers outsize control and influence over their companies. Critics say this has led founders to take a freewheeling approach to running their companies, loading up on shares for themselves and their friends and presiding over toxic workplaces.

At the heart of the Benchmark lawsuit is a provision that venture capitalists say stands out for its deference to Kalanick, and is highly unusual. It allowed the Uber founder to personally appoint three new members to Uber’s eight-seat board, effectively letting him slant the board his way after he resigned. 

According to Benchmark, Kalanick got investors to sign off on the measure “fraudulently,”  by, among other things, hiding “gross mismanagement” at the company. Jimmy Asci, a spokesman for Kalanick, said the lawsuit is “completely without merit and riddled with lies and false allegations.”

On Friday three other investors sent a letter to Uber’s board, shareholders and Benchmark, saying the suit was designed to “hold the company hostage” and asked Benchmark to step down from the board. The investors are Sherpa Capital’s Shervin Pishevar, Yucaipa Companies’ Ron Burkle and Maverick’s Adam Leber. They didn’t immediately respond or couldn’t be reached for comment. Members of Uber’s board, not including Kalanick or Benchmark’s Matt Cohler, said they were “disappointed that a disagreement between shareholders has resulted in litigation,” according to an emailed statement.

Kalanick is far from the only founder deemed to have abused investors’ trust in him. Other examples include Jawbone Inc. founder Hosain Rahman and Tanium Inc. Chief Executive Officer Orion Hindawi, who were both given considerable autonomy or control by boards and then disappointed in their leadership. Rahman led Jawbone into bankruptcy and has now launched a long-shot bid to become a player in medical devices. Hindawi was forced to apologize after past and current employees described abusive behavior that prompted a talent exodus. 

In the 1990s, it wasn’t unusual for venture firms to replace founders as CEOs, usually because the investors believed the company needed a leader with more experience. That practice fell out of favor but has resurfaced in recent years.

Take GitHub Inc., the developer platform. In early 2014, a former Github employee, Julie Ann Horvath, complained that co-workers—going right up to company’s co-founder and CEO, Tom Preston-Werner—had harassed and discriminated against her. Preston-Werner ended up resigning after an internal investigation; in a more forgiving time, he might have taken a leave of absence and returned.

The following year, Parker Conrad, founder and chief executive of Zenefits resigned after news broke that he was using unlicensed brokers to sell health insurance in several states.

In those cases, the founders agreed to step down. In other instances, VCs have discovered that the relatively recent practice of ceding voting control has made forced resignations impossible.

At venture-backed company Theranos, once valued at $9 billion and now worth next to nothing, disgraced founder Elizabeth Holmes controls 98 percent of voting shares. That has allowed her to continue as chief executive even after it turned out her vaunted blood-testing technology didn’t work, putting the company’s future in peril.

One reason VCs tolerated over-privileged CEOS—at Theranos, Uber, Snap, and other companies—was because so much money flooded into tech, making it easy for founders of the most promising startups to shop around. Last year, $41.6 billion was raised by venture firms, the most since the dotcom era, according to the National Venture Capital Association.

In an extreme case, at vegan food maker Hampton Creek Inc., most of the board, not founder Josh Tetrick,  was forced to resign after directors lost all rights due to the voting control they had allowed Tetrick to amass.

But once again, venture firms are wising up.

Today, while more late-stage private companies are creating classes of shares with extra voting power, only 27 percent of recipients of those shares are founders and management, according to a study by law firm Fenwick & West. Three years ago, 43 percent of recipients were founders and management, rather than investors.

For a long time venture firms were loath to crack down on founders for fear they’d go elsewhere for capital. But that theory doesn’t really hold up, says angel investor Keval Desai, a backer of Optimizely, The RealReal and others. “Benchmark’s reputation has been built over many decades, and other entrepreneurs who have taken money from them will be proof that Benchmark isn’t in the business of suing their entrepreneurs,” he says. “Benchmark will be fine.”

    Read more: https://www.bloomberg.com/news/articles/2017-08-11/benchmark-signals-era-of-imperious-startup-founder-is-coming-to-an-end

    Apple Employee Moved To Tears By Cancer Survivor’s Courage

    click photo for more information
    Apple Employee Moved To Tears By Cancer Survivor’s Courage
    Advertisement Chase Lock is an adorable 8-year-old from Tucson, Arizona. He’s a great kid who’s seen way more adversity than he should have at his tender age. You see, when he was just two years old, he was diagnosed with a rare and very aggressive brain cancer known as CPC. After months of chemo and […]

    MIT created an electronic bandage that heals wounds faster

    click photo for more information
    MIT created an electronic bandage that heals wounds faster
    At some point in the future, your bandage might do a lot more than just cover up your wound. Researchers at MIThavedeveloped a malleable hydrogel that they can embed with sensors and apply to injury sites. Xuanhe Zhao, an associate professor in MITs Department of Mechanical Engineering, has been working on creating a hydrogel that […]

    Ayaan Hirsi Ali: Female genital mutilation and what we’re really talking about beneath the weasel words ‘genital cutting’

    click photo for more information
    Ayaan Hirsi Ali: Female genital mutilation and what we’re really talking about beneath the weasel words ‘genital cutting’
    The recent news that a grand jury in Michigan has indicted three people, including two doctors, for female genital mutilation is a welcome development. As the first ever prosecutions of this crime in the United States, the case shines much needed light on an underground human rights abuse that has been going on for too […]

    If You’re Feeling Sick, Put An Onion In Your Sock. It Sounds Insane, But It Works!

    click photo for more information
    If You’re Feeling Sick, Put An Onion In Your Sock. It Sounds Insane, But It Works!
    It’s that time of year: Temperatures are finally getting colder, people are more miserable than ever (when’s the next big holiday?), and illnesses are soon to rise. It’s almost unavoidable in the wintertime. If you’re looking for a quick cure for all that ails you, there is a peculiar yet effective method of dealing with […]

    5 BS Myths About Being Poor You Believe Thanks To The Media

    click photo for more information
    5 BS Myths About Being Poor You Believe Thanks To The Media
    Poor people, right? Visit the “news of the weird” section of a major media site and you’ll find a gauntlet of undesirables engaging in such wacky antics as getting into drunk fistfights at McDonald’s and whatnot. And, in basically all of these cases, what you’re reading barely qualifies as news. It’s Internet rubbernecking and — […]

    Sex Ed Lied To Us: It Turns Out You CAN Get Pregnant When Youre Already Pregnant

    click photo for more information
    Sex Ed Lied To Us: It Turns Out You CAN Get Pregnant When Youre Already Pregnant
    Like puberty itself, sex ed is just one of those things that’s generally awkward and causes excess sweating, but is an unavoidable part of growing up. Whether you sat in a classroom full of other uncomfortably squirming sixth graders, or had “the talk” at home with your uncomfortably squirming parents, at some point we all […]

    Khlo Kardashian Revealed 3 Tips On Getting Prepared 24/7 For Date Night

    click photo for more information
    Khlo Kardashian Revealed 3 Tips On Getting Prepared 24/7 For Date Night
    Everyone has their own pre-date night rituals. Me? I cry a lot before looking myself in the eyes in the mirror and saying Im good enough, Im smart enough and gosh darn it people like me. But everyone is different! Khlo Kardashian probably has more helpful tips when it comes to dating than I do, […]

    British bodybuilder dies of liver cancer due to drinking 6-7 energy drinks daily

    click photo for more information
    British bodybuilder dies of liver cancer due to drinking 6-7 energy drinks daily
    Bodybuilding is perhaps one of the best forms of exercise. It is an anaerobic form of exercise in which the focus is to build muscle. Larger, stronger muscles have many benefits, the main one being you are simply making your own shell stronger so that you can function at a higher level, perform tasks easier […]

    Caught on tape: Dem official says he’s ‘glad’ Scalise got shot

    click photo for more information
    Caught on tape: Dem official says he’s ‘glad’ Scalise got shot
    A Nebraska Democratic Party official was removed from his post on Thursday after an audio recording surfaced of him saying he’s glad House Majority Whip Steve Scalise got shot last week. Phil Montag, now-former co-chair of the state partys technology committee, was recorded saying he wishes Scalise, R-La., were dead. His whole job is to […]

    Watch The Senate Gasp Aloud As John McCain Votes No On Obamacare Repeal Bill

    click photo for more information
    Watch The Senate Gasp Aloud As John McCain Votes No On Obamacare Repeal Bill
    Video of the vote, tweeted by entrepreneur and activist Michael Skolnik, shows McCain walking to the front of the Senate floor after his name is called, stretching out his hand, pausing and saying No loudly enough for all to hear. His colleagues gasp, and some applaud as he makes his way back to his chair. […]

    MSNBC’s Joy Ann Reid attacks Scalise as he recovers in hospital

    click photo for more information
    MSNBC’s Joy Ann Reid attacks Scalise as he recovers in hospital
    As Rep. Steve Scalise lay in his hospital bed recovering after he was shot by a maniac gunman who was hunting congressional Republicans, an MSNBC host asked whether the House Majority Whips life-threatening injuries meant Americans had to ignore his political positions. Joy Ann Reid on Saturday cited Scalises positions on ObamaCare and gay marriage […]

    Ashton Kutcher Tearfully Defends His Day Job Testifying to Congress on Sex Trafficking

    click photo for more information
    Ashton Kutcher Tearfully Defends His Day Job Testifying to Congress on Sex Trafficking
    On Wednesday, Ashton Kutcher testified at a hearing at the Senate Foreign Relations Committee in Washington, D.C., in hopes of ending modern slavery and human trafficking. Whether you know him as Michael, from That 70s Show, or from one of his many more recent spots in film and TV, Ashton Kutcher is a Hollywood star […]

    No more fillings as dentists reveal new tooth decay treatment

    click photo for more information
    No more fillings as dentists reveal new tooth decay treatment
    Scientists in London develop pain-free filling that allows teeth to repair themselves without drilling or injections Scientists have developed a new pain-free filling that allows cavities to be repaired without drilling or injections. The tooth-rebuilding technique developed at King’s College London does away with fillings and instead encourages teeth to repair themselves. Tooth decay is […]

    This Comic Perfectly Explains Why Anxiety & Depression Are So Difficult To Fight

    click photo for more information
    This Comic Perfectly Explains Why Anxiety & Depression Are So Difficult To Fight
    We all experience anxiety and depression at one point or another, but some of us experience these feelings chronically. It can be difficult for those who don’t suffer from these chronic disorders to understand those who do, so they can sometimes say some fairly insensitive things; “Why don’t you just get over it?” or “What […]

    Denial Kills

    click photo for more information
    Denial Kills
    Read more: https://imgflip.com/i/1ar3pi
    load more posts